Another Reassessment

by Nick Molnar on February 23, 2007

Just before Indiana’s two percent cap on property taxes takes effect, St. Joseph County is reassessing property values. The new values have not yet all been determined and none have been certified by the state. As you might suspect, the values will mostly increase, and mean more taxes for many. If you already own a home brace yourself for the rise. If youâ€™re preparing to purchase, arm yourself with knowledge.

Because Indiana property taxes are paid in arrears, taxes from 2006 are paid in 2007, they are pro-rated at closing when a property changes hands. For example, if you buy a house and close May 1st, the title company will figure the taxes due for 2006, then collect four months worth from the seller and credit the amount to the buyer. It’s not free money – it will be due when the next tax bill is sent.

If the tax amount used in these calculations is wrong, then the amount collected from the seller is wrong and often the amount your lender escrows for future taxes is incorrect. Both situations require you to make up the difference when the next tax bill is due. This can mean a lump sum payment or an increase in your monthly mortgage payment.

If you are buying a house in the next few months – before the new valuations are known, be certain you understand the tax implications. They are easy to overlook and even many professionals don’t fully grasp the situation. Be sure the newest applicable tax rates and values are used to figure the taxes. If these amounts are not known, you should deal with that up front. Either decide the uncertainty is acceptable, or ask for sufficient funds to be escrowed to cover an anticipated increase in taxes. Any overages can then be returned to the appropriate parties after the taxes are paid.

To get your new rate you’ll need to contact the appropriate township assessor’s office and ask for the “uncertified, trended” values from 2006. Keep in mind, not every township will respond in the same way. Centre said they didnâ€™t have the numbers yet. Harris gave me the new numbers cheerfully. And Portage told me they couldn’t give out any figures that weren’t certified.

The properties I inquired about in Harris were in the $150,000-$200,000 range and increased in assessed value by about $30,000. At a 3% rate, that’s about $900/year in additional taxes.

All of this should be considered as you are choosing a house, negotiating a price and terms, and closing the deal. If youâ€™re considering embarking on a home purchase and this concerns you, contact me and Iâ€™ll help you make sense of the potential impact. nick@realst8.com or 574-309-3758.